MAN, market operators, others list agenda for incoming govt

Posted by Vanguard | 3 months ago


Removal of fuel subsidy, multiple exchange rates, privatisation rank high

We seek balance of attention between money, capital markets — Stockbrokers

Multiple taxation, others must be addressed to boost investors’ confidence — MAN

As Fidelity Bank chairman calls for return of margin lending

By Babajide Komolafe, Peter Egwuatu, Yinka Kolawole and Cynthia Alo

Despite the lingering controversies surrounding the just concluded Presidential election, financial markers operators have articulated an agenda for the Bola Ahmed Tinubu, the declared President-elected.

Key amongst the issues they consider pressing in the economy at large and the financial sector in particular include, elimination of petrol subsidy and multiple exchange rate system, as well as execution of a fiscal reforms including elimination of multiple taxation.

Others recommendations are privatisation of non-performing public enterprises, securitization of the Ways and Means, adoption of Public-Private Partnership, PPP, model for infrastructure development.

They also want the government to balance its attention on both money market and capital market development while stimulating liquidity in the later.

Speaking with Financial Vanguard during the week, Head of Equity Research, FBNQuest Capital Limited, an arm of the First Bank Group, Tunde Abioye, stated: “Some of the things we expect from the incoming administration include Fiscal reforms – to implement fiscal reforms aimed at expanding the fiscal space. Such reforms must include the elimination of fuel subsidies which are estimated to have gulped close to N7 Trillion in 2022. This would reduce the FG’s expenditure profile, and free up revenue for investment in other sectors such as education and health.

“However, as we mentioned in our outlook report, the decision is likely to prove unpopular with a variety of stakeholders, including labour unions. The government will have to improve transparency around the savings from subsidies, as well as its communication and engagement with all stakeholders.

“Tax reforms – carry out tax reforms aimed at expanding the tax base, increasing collection efficiency, and plugging collection/ revenue leakages.

“Monetary/exchange rate reforms which entail working with the CBN to achieve convergence of the multiple exchange rate regimes into a single market clearing rate. I see this rate at close to or around NGN600 per dollar. This will help expand the fiscal space for all tiers of government because the upwardly revised exchange rate will translate to more naira revenue for the FG, states, and local governments.

“The incoming government should fast-track the securitization of the ways and means obtained from the CBN by actively collaborating with the national assembly. Doing this will reduce the current debt service burden. Already proposals are in place to securitize the loans at 9%. This compares with the current interest rate of MPR + 3%.   

“The incoming government should privatise non-performing state-owned assets of the FG. This will raise additional revenue for the FG to fund its budget deficits.

“The government should build on the existing PPP models such as the Road Infrastructure Tax Credit (RITC) Scheme to address the infrastructure gap.

“The incoming government should improve on the work done by the out-going administration on the ease of doing business. This should entail a closer look at elements such as the existing taxes with the aim of harmonizing the multiple tax regimes, and a more prudent approach to granting incentives, waivers and concessions.

“There should be Incentive schemes for non-oil exports: the incoming administration should work with the CBN to strengthen already existing schemes to stimulate non-oil exports. Presently, non-oil exports account for a paltry 10% to 11% of merchandise exports. Also, Nigeria’s export of services is almost non-existent. Consequently, we need to develop a vibrant services sector for exports.”

Balance money and capital markets — Stockbrokers

Also speaking to Financial Vanguard, the President, Chartered Institute of Stockbrokers, CIS, Mr. Oluwole Adeosun, said: “First, is to properly situate the capital market in the scheme of things in the Nigerian economy. The capital and money markets must receive balanced attention for the economy to grow maximally, even optimally as the capital market provides the barometer that measures the state of the economy.

“Second is for the incoming administration to address the issue of trading liquidity. Get the banks and CBN to give more support to capital market operators. 

“We have to revisit margin lending trading in the financial markets. Furthermore, there is need to persuade the pension funds administrators to invest a lot more on equities, to create that stability that will motivate other high networth to invest. Also, to make the exchange rate stable to spur foreign investments.

Abrogate Capital Gains Tax — Securities Dealers

Recommending as well,the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwue, urged the incoming administration to abrogate the Capital Gains Tax (CGT) to attract high net worth investors into the market.

He also advocated the need for the government to grant incentives to attract more listings into the secondary market.

He stated further: “The fundamentals of the market are getting stronger day by day as a result of so many reasons. The elections actually excite the market, because of the imminent positive changes we expect, irrespective of which of the top candidates win. It signals great expectation and trust.

“We expect the new president and his government to hit the grounds running before the inauguration by immediately opening engagement with the capital market community, as that will help in crafting an effective plan of action for the administration”.

Speaking on reducing transaction cost to attract more investors into the market, Onwukwe stated, “There is a need to reduce the cost of transaction on the market such as abrogation of capital gain tax (CGT) to attract high net worth investors.

The Central Bank of Nigeria should soft pedal on its stance on re-introduction of margin trading to boost transaction on the market and quotable companies should be encouraged with incentives such as tax holiday and government’s deliberate patronage of such companies’ products and services to seek listing on the secondary market.”

Fidelity Bank chairman calls for return of margin lending

Also speaking, the pioneer Chief Executive Officer of Asset Management Corporation of Nigeria (AMCON) and the Chairman of Fidelity Bank Plc, Mr Mustafa Chike-Obi, charged the incoming administration on the need to revive margin and securities lending in the Nigerian capital market.

He stated: “With margin lending, the Nigerian capital market in addition to all the recent achievements and regulation can bounce back again. Margin lending will increase the volume of transactions in the market. It will create hedging opportunities and value propositions. Until we do that, we are going to be a stone-age capital market. This is not for just equities but debts as well”.

Inflation, interest rates should be addressed urgently — Wyoming Capital

In his own recommendation, CEO, Wyoming Capital and Partners, Tajudeen Olayinka,  said: “For the incoming administration it must address the issue of high interest rate. It goes without saying that a high interest rate environment is inimical to economic growth, job creation and the stock market.

He stated: “The urge to move capital around the world for greater portfolio return (capital mobility) and the effect of inflation on nominal values could be responsible for nominal increase in the value of investments by foreign portfolio investors this period. However, the fact that economy and market did not really feel the impact of such level of capital flow, means that rising inflation and exchange rate movement were largely responsible for the level of increase. So the new government must look into this issue of inflation.”

Multiple taxation, others must be addressed to boost investors’ confidence — MAN

In a document made available to Vanguard, the Manufacturers Association of Nigeria, MAN, listed scarcity of foreign exchange, naira devaluation, high cost of diesel/energy/gas, multiple taxes, charges, levies, unavailability of raw materials, delay in receiving imported raw materials and high cost of Raw materials as some of the challenges limiting the growth of the manufacturing sector under the outgoing administration.

MAN, therefore called on whoever forms the government in May this year to urgently address these concerns to grow the economy.

Director General of MAN, Mr.Segun Ajayi-Kadir, in the document, stated: “It is critically important that the identified current challenges of the sector by manufacturers themselves should be quickly taken up by the Government with priority attention. The issues of acute shortage of forex, high cost of raw materials, inadequate power supply, multiple taxes/levies, etc., should be addressed so as not allow for further degermation in the activities of the sector.”

MAN noted that in the fourth quarter of 2022, manufacturing activities was adversely affected by escalation in the Consumer Price Index (CPI), continuous erosion in Naira value and difficulty in accessing foreign exchange, high cost of energy, persisting insecurity and the consequences of lingering RussianUkrainian war.

Ajayi-Kadiri added, “It is crucially important for the Government to have a shift towards a better exchange rate management; and moderate the rising energy cost via better management of refined petroleum products imported into the country. These among other measures would no doubt help reduce the current high inflation, which is fast eating up the working capitals of businesses including manufacturing in the economy.”

On his part, the Executive Secretary of MAN, Imo/Abia State Branch, Mr. Prince Henry, also lamented the burden of multiple taxation in the sector while calling on the incoming president to centralize revenue collection by the State Internal Revenue Services.

He said: “The incoming president should ensure consistent infrastructure upgrades in all parts of the state. Independent Power Plants for our industrial parks should be embarked on to curb the monopoly of Electricity distribution companies which has been a challenge to manufacturers and other consumers.

“The incoming president should also tackle insecurity in Nigeria and at state levels by remarkably investing in security to protect lives and property.

This will further rebuild the confidence of investors.Generating avenues for job creation for our teaming youths through micro financing.

“Assist in directing Regulatory Agencies, especially Standards Organizations of Nigeria (SON), National Agency for Food and Drugs Administration & Control (NAFDAC) to reduce their respective administrative charges (Pre-COVID-19 rates) payable by manufacturing concerns by 50 percent.”

“In this regard I would like us to key into the African Continental Free Trade Agreement (AFCFTA) which presents enormous business opportunities for the manufacturers,” he added.

Govt should end culture of regulatory intimidation — CPPE

Meanwhile, the Centre for the Promotion of Private Enterprise (CPPE), an economic think tank, has called on the incoming administration in Nigeria to create a regulatory environment that keeps risks and shocks at the barest minimum, initiate policies that address the concerns of the manufacturing sector, and ensure tariff regime that protects local industries.

Director, CPPE, Dr. Muda Yusuf, stated this while setting an economic agenda for the incoming federal government, noting that the nation desperately needs a new economic direction.

His words: “The Nigerian economy is in a stumbling and fragile state and in dire need of a new direction. The political transition offers a great opportunity to chart a new course.”

Among other recommendations, he said that the incoming administration should, “should prioritize trade facilitation and removal of all non-tariff barriers to trade.

“There should be a balance between the revenue objectives and trade facilitation objectives of the Nigeria customs service.”

On industrialisation, he said: “Urgent steps need to be taken to ensure liquidity in the foreign exchange market to guarantee access to foreign exchange for the procurement of raw materials and machinery for industry.”

Yusuf further stated: “Regulatory institutions and economic players must relate as partners, without necessarily compromising regulatory effectiveness.

“We should put an end to the culture of regulatory intimidation, coercion and undue harassment.”

Source: Vanguard


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